Writing off a bad debt as a tax deductible expense is not straight forward. According to the Ministerial Regulation No. 186 (B.E. 2534), the company can recognize a bad debt write-off for every receivable blow Baht 100,000 (per debtor) if the following criteria are met:
Keywords: Thailand, Tax, Bad Debt Write-Off, Tax Deductible Expense
1) Allowable debts must be of the following nature:
a) Debts arising from carrying on normal business activity;
b) The debts are not time-barred;
2) Demands for payment have been made but a court action against the debtor would incur a greater expense than the amount expected be recovered; and
3) The write-off shall be recognized as an expense in the current accounting period.
The Revenue Department Officer will assess whether the bad debt write-off complies with the above criteria. If not, the Officer has the power to assess the tax due with a surcharge of 1.5% per month according to Section 27 of Revenue Code and a penalty of twice the amount of the tax due according to Section 71 (2).
For bad debts by a debtor exceeding Baht 100,000 or Baht 500,000, legal actions to be taken against the debtors vary significantly from case to case. We recommend you to consult your tax advisor for further advice.